tv Bloomberg Go Bloomberg September 13, 2016 7:00am-10:01am EDT
policy decision. hopes fade away. reinforce china. largest 's second economy rebounds. ahead. >> and crew change of heart. tkpwhrut will last longer than initially estimated. ferro alongside david westin and alix steel. >> i feel like we've walked up back down d walked the hill. nothing fundamentally has changed alix. a rotation been within the aspect class market. america out with their fund level. level at september 5.5. >> you wonder whether that comes given what we've seen. resilience in the last 24 hours.
futures seem to be negative. in a repeat of yesterday, down in the european session about dow.points on the then we come back up as things start to unwind. be interesting to see. >> kicked back nicely yesterday. pause or are we seeing a rotation or minitemper tantrum? that.ll be dissecting we have some great guests for tabckling the feds. scott e joined with minors. he will reveal his big call on year note. plus, later we're going to head buenes ares. but first, you're standing by to market.the it felt a little bit down this morning but except you look at commodities. governor's brainard's speech. struck by her.ne they were. wasfollow through to europe
as follows. three days of losses. we snap that up. yesterday, a softer dollar session. little reverted just a bit with the bloomberg dollar index up by quarter of 1%. happening on the cable rate. down by half of 1%. inflation in the united kingdom came below estimates. downside surprise potentially the door if they so wish to cut rates again at the bank of england. hat's a narrative in the city of london today. commodity market, the iea. hey say that's likely to persist. t's because not just the precise side of the equation. that's a story for us. another story is what happens the bond market.
rate hike is starting to field away and yields just coming in. 2.5 basis y about points. we trade at 2.366%, alix. yes, we do. yesterday we had a decidedly brainard's ove after speech, right? are we looking at a regime into higherhe market yield out of the risk for yield today just a pause? >> well, i think this really three nearly two to weeks ago when jgb began to reverse. quiet riot in the jgb market. really the follow on from that post the ecb meeting in which there was really no signs qe.any further we've got selloff through the uk markets.ond finally on friday into the u.s. so i think we're in a period at
the markets ere will test the upside yields on these government bond markets to what point things have to turn around and be much more dovish. markets, equity markets will probably trade very quietly. nd more importantly the boj meeting next week. the question is, how do you find those uncorrelated assets? at bank of a look america multistrategy index one day percentage move, this should be the calm. you shouldn't see big moves in the kind of correlation, sean. we do see a go if pickup involved? good l, it's a really question. unfortunately global equity markets have been gripped for the best part of the last 18-24 months. tend k the places you do to hang out or hide in is probably in places like in the
market.te share possibly also in parts of korea and taiwan. even i would probably suggest asian as well. they have got large accounts, foreigners don't own very much of their bond market, and a degree of immunity to what we've seen in terms of monetary policy. countries have been loosening and cutting rates in rate in of the fed rates over the last year. there's an independence of central bank policy compared to feds. >> sean i was talking about this earlier today. fact that for the him this isn't about the fed. ecb does t what the with qe. you mentioned the quiet tantrum a month ago. about we're reporting today the boj is looking to consider to tweak all abandonments from bonds.vernment
how critical is that going to be for you in the coming week? >> i think it's really important. i would take away from this and ecb meeting is that the implementation of further negative deposit rates is off the table. that really has been a big rally for banks. secondly, the central banks want flexibility at the long end in terms of issuance. i think having a range of duration that would suit the and secondly ultimately this has got to be forgiveness inbt which bond jgb issues go out 00, 200 years and almost into perpetuals in order that the debt is counciled. that's really the realistic from all of this. and i think what you've just mentioned the halfway house boj in terms of the ultimate policy action which is debt cancellation. sean, you mentioned potential strength in china. we got some numbers that were encouraging. outperformance from the chinese economy overnight.
fundamentals at this point take over or are the voices coming out of the central markets loud that the will only respond to those? very l, i think it's a lot of time t is spent analyzing the commentary. the second largest central bank also produces quarterly statements. if you read between the lines what the pboc has been doing, doing its own back door qe. it's been as tkra mastic as what e have seen in the bank of england over the last 18 months. it's just been very quiet and very subtle. easing policy that china has done has been incredibly good for the economy. provided e for mouse amounts of liquidity for the corporate sector and what i is a big big eing change in solvency. worry about uge indebtedness of companies. in 's been slowly receding
china. got quite a big regime shift also being taking place there as well. >> you also brought up global banks. what we've seen is that global versus say local utilities have started to perform. thesis hold sway if we do see the boj step back on its to purchase assets? >> well, i think what's happened japan in the last three weeks is very subtle. brought us into this collapse of yield curves in negative and he positive rates. they've been the first to see a yield curve. the and that's really led this sort of rally in financials. so i think what the boj is saying to the rest of the world having it's not good flat yield curves and, clearly, the pain has been taken in the banking system in japan has been very very deep. i think that there's been a 180
reversal in opinion there. as i said, we probably are now oing to see this yield curve stablize in japan be steeper for lot longer than perhaps the markets have assumed maybe 12 months ago. >> sean, thank you very much for being with us today. darby, jeffrey's chief global equity strategist. alix and look at some movers in oil. oil is down. having flat yield curve seven years later. okay. oil. today down bymove about 2%. you see this drop off. eia, iea saying the surplus ill last longer than anticipated. part of that is due to more supplies coming online. he other part is really due to weaker demand. year low in two part because in india and china. demand, as g market well as the developed market demand really taking a back seat. hat having an impact on oil
related stocks. if you look at european oil stocks, they're getting hit a here.e bit shell off by about 1%. here in the u.s. one of the premarket movers is anadarco. million elling 35 shares in order to buy some assets fromep water freeport deep water gold. this will add about $5 billion cash flow over five year. going to use that to fund some delaware in the basin. not the debt market. really interesting trend in the guys.ale, let's get an update on what's making headlines outside of the business world. emma? >> thank you, alix. endary clinton is trying to speculation about her health. the democratic presidential andidate is suffering from pneumonia. video sunday appeared to show her almost stumbling as she was by staff and van secret service agents. clinton told cnn she was overheated, but when she sat
and had some water, she felt better. on husband spoke last night charlie rose. > more than one occasion over the last many, many years same sort of things happened to her hen she just got severely dehydrated. she's worked like a demon. not only secretary of state and is a senator in the year since. can watch all of charlie rose interview with former president bill clinton tonight bloomberg at 7:00 p.m. eastern time. planes were sent to send a message to china. flew over south korea accompanied by south korean fighter jets. the u.s. pacific command said it a show of solidarity. several days after north korea's test. nuclear weapons the cease fire in syria's civil war appears to be holding. activists are on monitoring groups say there have been only minor violations.
truce was brokered by the u.s. and russia. the goal is to last for seven day. sraeli warplanes struck syrian artillery positions. israel said anti-aircraft fired missed.planes but global news. 24 hours a day powered by more than 2600 journalists and in more than 120 country. this is bloomberg. >> thanks, emma. up, taking down the hawks. brainard gets the final of the september meeting. from new york city, this is bloomberg.
bloomberg. debate where ke the federal reserve governor cold water on the potential for a rate hike. > the asymmetry in the conventional policy tool kit would lead me to expect policy in favor ed somewhat of guarding against downside to raising ve wraeuts to guard against up side risks. message potentially for the fed hawks. the dove on the fed continues to dovish. that's a surprise. let's bring in the professor of economics for harvard. why are we surprised that a dove's a dove? >> well because we've been seeing others in the fed system titan. towards eric rosengreen, head of the williams of the fed, these guys
the signaling that maybe time had come to tighten. there was speculation that brainard would also move in that direction but no no. >> month of the march, stanley fisher came out and said inflation pressure weres to emerge. they were beginning to stir. ael brainard said completely the opposite and risk went to the downside. she won out. out again?a win >> i think the fomc just keeps excuses not to raise rates. they did that at every meeting year. stan fisher and jackson hole had the same message, the time has start tightening. the people who don't want to the en just don't see adverse consequences of running ith zero rates or long the curve. >> let's talk about the adverse consequences. where are they right now? i think there are two things. one is the inflation pressure. inflation doubt that
is rising. if you look at core cpi which is the fed's chosen number, but if you look at the core cpi, 2.2%.p if you look back a year ago, it 1.7%.omething like so it's beginning to tighten because the labor markets are markets are duct tight. >> but as a practical matter, this.you look at it's been a long time that you've had really low rates. really had a problem with inflation. 2.2% inkphraeugs historically is not a problem. that they see al metric risk if they raise they'll be blamed for it. >> absolutely. that's a political risk for them. at some point they have to do there to do. i think their strategy is to keep rates very low. they raise rates by 25, 0, 75 basis points over the next 12 months, rates will still
be exceptionally low. there's going to continue to be on inflation.e i think they're heading higher rate of a inflation so that once they've otten to, say, an inflation rate of 3%, 3.5%, that's when short term k up the rates. why do they want to do that? so that if the economy turns cut those rates. right now they've got no ability rates if the economy goes soft. they would say they're just and trying to anticipate the problem that they're gonna face if the down.y turns but i think the other thing that they're missing is all of the effects of investors reaching for yield. a serious that's problem. once these markets turn and long start to move up, they're
gonna be a lot of folks who get because they have taken duration risk at very low rates.t >> we see securities which idea, is the fed and economists like yourself able to appropriately model actual u.s. growth? >> appropriately? probably not. know is if they keep interest rates real interest rates negative, which doing, if they keep real interest rates negative, inflation is just gonna keep creeping up. it doesn't have to get to the kind of scary numbers we had a ago.e of decades if it gets to 3%, 3.5%, then respond, push up rates and that will put them in a position. it's a risky strategy. >> one thing the feds proved is asset values up. they haven't shown they can get the economy growing at a more brisk pace. a problem with the
transmission mechanism? >> no. did conomists, they really bring about recovery. we wouldn't had qe, have seen the kind of growth and prices.anism was asset so the whole strategy was to upve up equity prices, drive home prices so people felt wealthier. and if they felt wealthier they spent money. so they can produce 3%, 4% real measure it, y we but they can and have been able to drive down the unemployment drive up the economy. us.you're sticking with >> coming up, what a donald trump presidency could mean for growth.. economy and gdp could be gang buster. plus later guggenheim's scott joins us with his big call on the u.s. ten year yield.
>> professor of economics at harvard is with us. there is some rhetoric out there that if trump is elected president there will be a huge ever us unlike we have seen since fdr. do you buy that kind of potential? >> i don't think we have any he would do as president. i don't know anybody who is about economics. so i don't think we can project any of those things. interesting though is republican presidential nominee talking about major stimulus not in the conversation has been budget, deficit reduction. we've seen gdp continue to rise as gdp continues to kind of fall. happening? >> gdp is not falling. debt to gdp has been stable for the last few years because of he sequester, because of tax increases. but now it's rising again. nd it's projected, we've
ratio.d our debt to gdp doubled it. >> that white line there is the debt to gdp and blue line is gdp.ent >> see the white line going up. >> i don't see the case for the line declining. rising.gdp is it's rose 1.5% in the first half rate.is year at an annual it's projected by most experts to rise more than 3% going the next quarter. >> so what is your prescription for growth? moral bus growth across the country? is it stimulus? doing tax d be reform. that would help. there are various market reforms do.t we could i think ab licensing. licensing is a serious barrier jobs, moving ging from one place to the next. hat's grown dramatically over the last decade. so we ought to be re-examining of and trying to roll some
that back. >> is part of the issue though that we don't know how to more?re u.s. growth any we don't know how to measure productivity? is that part -- >> it's not a question of nor more. problem.n a perpetual there are two things that make it hard to measure what's appening to real growth and to productivity. but he government tries, doesn't get it. one of them is quality improvements. seeing day we're improvements in the quality of the goods and services and yet captured in not our statistics. nd new products, things that are adding real value. and again, we don't see that in statistics. so as i have been studying that i'mf recently in detail and convinced that we are just substantially underestimating doing.l we're and i think -- and that also overestimatingre
inflation. should dea that the fed 1.8 when from 1.6 to we probably can't measure plus or minus 2%. nutty.ust >> there you go. marty, really good to have you with us. feldstein, y professor af economics at harvard university. >> your upbeat view. all right. coming up, it is a journey towards 1%. guggenheim's chief guggenheim' investment officer with a $250 billion under management explains how we get there out of the ten year. this is bloomberg.
it was just in positive territory. dax holds steady. fx market yesterday, weaker story. today flipped on its head. you have a bloomberg dollar that story up by 0.03%. iea.headline is from the that's set to persist. percentage two points 45 handle wti, 47. bonds market if you're suffering from rate hike took a lady who took stress levels down. leal brainard, taking out the fed hawks ahead of next 21 fed september decision. but for me, there's another big decision that day. boj. the the big question is what do they do with their asset purchase program? me is the e behind yield curve.
this one here where the long end yield curve starts to come up and the curve itself steepens. question is whether they extend the change the qe program that curve to continue to steepen. we've been looking at this and reporting today here at the average range of maturities that they look at currently from 7 to 12. adjusted or dropped altogether. speculation, alix, is that the make a japan is going to change next week. the question is whether they continue to allow that curve to steepen. if they want more flexibility in order to do that, to help the banks as to help well. here's the other news you need to know. unexpectedly unchanged in august. consumer price growth less than .007% forecasted by economists. the rate though is still the late 2014.ce both import prices and factory most since the 2011.
and china's economy strained. factory output and investment all exceeding estimates. industrial production rising from a year earlier in august. over 10.5%s climbing last month. and people are talking about the international agency said the surplus in global oil markets will last for longer than thought.y persisting into 2017. growth slumps d and supply proves resilience. that's what you need to know at hour. david? >> thank you very much, alix. we're going to turn now to the election. days to go, our political team is focusing right ow on just what will determine whether donald trump or hillary clinton moves into the white in january. our political reporter tells us central in the battleground states of pennsylvania, ohio an michigan. equation up here. i didn't think i would be
looking at algebra when i was politic. take us through it. >> so every campaign looks at electorate in the same way. all these bells and whistles oing on, all these campaign strategies. it's this equation. base voters. voters that you know will turn out. they already support you. then you have what they call the gotv or get out the vote voters. supporters -- they're less likely to vote so game.- this is a turnout this is where ground out matters. then you have independents, you have to change their mind. you add those up and you can hit your win number. briefly apply this equation to pennsylvania, ohio and michigan. political the analysts say donald trump has to win pennsylvania, probably has ohio.n so apply it to pennsylvania. >> exactly. so what we did, my colleague sasha and i, we looked at the
basic math of pennsylvania and e found that hillary clinton and the democrats have such an advantage there, that she could turn out all of her base, she turn out all of her gotv. pr doesn't need any help independents. trump would have to start peeling away democrats. > so in pennsylvania trump has got to attract some democrats. what about ohio? story.o's a different ohio, both parties are even in goes.as far as their base they both start with about 2.4 million voters on either side. is that about ohio there's a large group of persuadable voters there with a direction that they swing is key.ly the one thing that sasha and i did in this story is we looked donald trump is gonna peel away democrats, who are the most likely democrats for him to away? and so what we did, we looked at the democratic coalition. we thought if you're gonna peel women, minorities, those might be harder for him. males, working class particularly in economically challenged areas, may be his
ticket. exactly to that, there's a bloomberg news piece out just today, clinton swing backlash with deplorable remarks that talked about a white n ohio and unemployed worker say they are more likely to vote for trump now. this is a big move for hillary clinton. about the 47% comment was it fits this narrative that trying tocampaign was mitt romney which is he is rich, he's out of touch, he doesn't understand your life. the trump campaign is trying to do that now with hillary clinton. whether or not it will work, we'll have to see. hey're going at it pretty aggressively. > if you compare the deplorables issues with the health issue, which is more likely to resonate with the voters that he has to attract? >> in the short term there will be focus on the health issue because of the secrecy in which he handled it.
of events in which we found out about them are probably more problematic for actual clinton than the health diagnosis. i think some people will con be to see her d want medical rorsd. long term the deplorables kphepb is something they will be with from now and the election day. the trump campaign is showing no go.n of letting it >> thanks so much. bloomberg politics reporter. jonathan? much, david. very so federal reserve governor leal the ard has a message for fed hawks. their word, patience. to quote her, the asymmetry in conventional quality target would lead me to expect policies o be tilted somewhat in favor of guarding against downside preemively ve to rating rates. did the fed hawks get the brainard memo? our next guest has a big call. heading u.s. treasury down towards 1% in the long
term. partner's chief investment officer. includingon in assets the guggenheim bond fund. great to have you on the program. >> great to be here. from brainard, she takes down the hawks. that was a message, wasn't it? was.t clearly i think governor brainard was talking to her peers there. preemptive t of a dissent, right? governors typically don't dissent. think she was sending a bold say, e to her peers to look, it's gonna be very hard for me to get on board here and why that is know true. and, you know, this was an opus, thesis on why we shouldn't be in a hurry to ray rates. and i think this is going to set tone of the dialogue at the meetings. what it w normal and means for managing policy. it is scathing for anyone on the ed who is a hawk and takes the other side of that and concludes with i'm going to show up and
to do?hat i'm going i'm gonna push back against you pretty hard. the does it say about division of the fed? she takes out rate hike costs, they're going to be pretty much paralyzed when table the o the following week. are so iews in the fed divergent and strong. people believing that we are behind the curve, that we should get two more increases this year. then you have people like brainard who are saying, whoa, what's the hurry? inflation's not picking up. is good, but maybe full employment is a lot lower than we think. bloomberg just last week where i think we're going to wake up and see is closer to 4% than 5%. >> which is basically what she itself.the speech it will be a whole lot lower.
we may have to think everything. >> saying the curve isn't that could in part be part of the reason there's labor market.the you think brainards of the world the fisher, the lockharts, the dudleys of the world. would that be accurate? know if i'd trump out anybody in this election. think nt i think is i that the doves have the upper hand in the long run. know, i think that qe over japan, the pe and markets are hostage to qe. >> yep. early, then we assed the qe baton to the japanese and europeans. at the least sign that we're etting off the qe wagon, the market throws a tantrum. and so, you know, i think that policy makers and central bank officials decide that it's removing art accommodation, that that
actually is going to be good for ong rates because people are going to say, economy's going to slow and we don't have as much weard pressure on rates that think in the long run. >> flip side of that is that if wins out or advocates that that's got to be a big head the u.s. ten year. >> i think you're right. nly a fool would continue to stick with a call in the long run. but i think that the fundamental drop here of central bankers to essentially say urgency to kind of start reducing the accommodation basically em is creating a head win of growth. that turns out at the end i'm wrong and dr. feldstein has elment and lling that we're going to run inflaying hot, we could see rates move up. that real rates of return on bonds have been negative 4% historically in the states. so even a 3% inflation rate
ten year le out a 1% note. >> great to have you with us scott minerd. > we did bring up the question ab how you prepare for risk volatility. minerd reveals how to invest in the real world. of later gm's executive vp global product development will tell us how they plan to take on electric car giant tesla. this is bloomberg.
actively run debt fund is trimming its bet on bonds. cutting the duration of its holdings, selling reasuries, buying inflation linked bonds. with us.erd still scott, what are they doing to prepare with no rate hike on the horizon? what are you going to be doing? >> we've basically had a the olio construction for last two years which has emphasized long duration asets nd a lot of floating rate securities. this is traditionally called the barbell. y doing this, we're able to adjust our duration target to anything we'd like it to be ecause you just change your waiting between floaters and long duration assets. ut, you know, if you look historically what's happened at raise interestto rates over time, the yield curve traditionally flattens and bar extremely gies work well in periods where the yield curve flattens. funny following
today. feldstein danny conway works with us. i have done a lot of work with danny on this. interesting. investors change their portfolios too frequently. think in portfolio management is to understand what a long term trend looks like and to take e portfolio advantage of that trend. i don't want to be critical of pimco but changing your allocation to an inflation big egy, it's a pretty move. >> the other part we see investors move towards is the floating rate e securities, floating loans, short term loans, leverage loans. are you buying that shorter term hunt for yield scenario? have been, yes. historically, again, when you bank loans, s like the best performance occurs fed endsear before the its tightening. loans are a very big
component of the strategy. ut probably even a bigger component are securities like clo's which are floating rates and investment grade. quality play. >> here's a question for you. if we the fundamentals, woke up on friday and all of a sudden there's a recall braying ex-kpaeupectations. to you ical is that currently? >> i think that's a very big of the strategy. sudden end o see a to these programs, i think we would get a tantrum in the market. even just a modest discussion about changing the dragi's or mario comment that they didn't discuss extending the program at the meeting. ou can see how sensitive markets have become to these asset purchase programs. and it would certainly have a
impact on our view of rates and portfolio construction going forward. >> are we likely to see more bond tantrums? here was a period where the japanese 40 year went three days without being traded once. there's literally no volume point.t this we are bound to see more tantrums. how many people are going to tantrums as almost an inflation point and not what it is. just a big spike in yield. >> what's interesting, after we were talking earlier today, the of finance announced they're increasing the size of 40 year. but the certainly all this affectingnk buying is liquidity in the market. central banks,ve you know, holding huge parts or of government debt, you can see that the minute you demand function from the central bank how easy it is jolted es to just get
suddenly. you know it's interesting, when 2012 d our last tantrum in or 2013, we saw what happened. the sudden spike in rates tightened monetary of itions and as a result it, the economy began to slow and inflationary pressures began to fall. it seems to me that an ending of hese programs is going to essentially have a downward pressure on the economy and world.ion around the >> meantime, buy the dip is the theme all around the world. you., pleasure to have thank you very much. scott minerd. coming up, chevrolet calls the new electric car a game changer. plans to uss how gm take on the lexus tesla and dealerships later mark royce.th
>> this is bloomberg go. the race is on to bring to market mass market cars that run electricity alone. called ev's. general motors is taking a different approach. arlier this year gm said it would be out by the end of the year with a 2017 chevy volt. his is a moderately priced vehicle with an extended range. until now, we didn't know how extended. executive vice president of global development and is with us now to tell us volt can go that on a single charge. welcome, mark. good to have you with us. so what's the answer? far can it go? david. i know you've been to detroit a few times. great sunrise.a we've had a great run here of eveloping the volt and today we're happy to announce that it's 238 miles on a single charge. game changer from that standpoint. but all the price point.
everybody. blast to drive. i know you've had experience driving it here when you were back in michigan. >> exactly. when i was out there you let me have one and drive around your proving ground. it is a lot of fun to drive. it has a lot of torque. ou said it's a moderately priced car. what sort of price are we looking at? >> i think we'll have a list -- we haven't finalized all the pricing yet. ut from the list price standpoint it's around $37,500 $7,500 credit there. it will come in at just under 30 here. little video ng a with me driving a blue chevrolet bolt around. a lot of fun to drive. so, mark, let me ask you the question on everybody's mind. i have to say is the elan issue.ve beening tesla they've gotten a lot of market cap driven into that company. how you're different on
tesla are taking? >> that's a great question. largest maker and seller of electrified vehicles. and as you said the share of mind typically goes to some of competitors. we take a long term view of this. we've worked very hard on our chemistry and the integration of our power control systems that control that in our cars. and worked on that now the second generation of the bolt is well.here selling very and you know, we find out what our customers really want and and what they can afford and where the value is. we think we have all of that covered with the bolt. we've got some utility with it. this is a bit of -- not a much, but it's got great cargo space in it. just chnology in it is fabulous. i think 0 to 60 in under 7 charging retty quick time with the new charging
standards which is the industry of 90 miles in under 30 minutes. things.e's lots of people can really use this as their primary transportation. roughly thedrive it distance from dc to new york and left have some charge over. this could be everybody's primary vehicle. -- that's a big change from and the price point that is roughly one-third of what some of our competition's doing here upper ends of electrification. we're taking a long view of this. always have. we've got a serious commitment to the technology, as you've seen. the long haul. >> mark, i was just over in china. was struck by the fact that everywhere i went they talked ab ev's and how important they to be.v's are going even when it comes to the price of oil. oil company. big said it's going to drive the oil price. in big could the bolt be gm's portfolio? how many vehicles are you looking to sell?
> we don't know the answer to that question because we don't take preorders on this. do know from a mobility, you're talking about a retail market. we all have a mobility market that we're developing with eople people like lyft as our partners. as we expand this, we see the bolt and that architecture playing a key role as mobility changes portation with sharing of rides. it will play a big part of that. china piece of that is really important because if you emissions and some of the regulatory piece of this really good he things that are developing in china in market right now with vehicles, we expect things like the bolt for gm. we're very strong in china. for many, many years. so the chinese piece of this, rom a market standpoint, will
-governor brainerd takes a dovish tone and rate hate -- rate hike bets are fading away. jonathan: policy support is doing its job. alix: oil is falling to a one-week low after the iea says the glut will last longer than estimated. david: welcome to "bloomberg ." brainerd speech got attention but there was another central-bank move from bank of japan. jonathan: let's begin with the brainerd speech. he scheduled a speech before the blackout period and wiped out the rate hike move. alix: is she on board for december? the boj could change the
maturity profile of its asset purchase program at its next so they want to kick a focus on the yield curve to help the banks. we will see whether it helps banks and savers and insurance companies. alix: pimco is taking duration risk off the table and buying inflation linked bonds. we will cover this over the next two hours. will go to and is aries for the argentina business and economic forum. the argentine president will join us with an interview. -- will go to buenos aires. the market feels relatively stable compared to the last two days. ofathan: we're off by 7/10 1% and europe is holding on to a slight gain. yesterday's move in the fx market, the dollar was softer and today it's stronger.
commodities, the supply glut is set to persist as told by the iea. wti is at a $45 handle. the federal reserve debate is fascinating. it's a recovery mode fed decision and the yield is coming in one basis point. we come in by three at 1.48% but the real story is dissent from the federal reserve. why wait for a meeting to schedule a speech and give the hawks a good slap and that's what president brainerd did. alix: let's go around the world and check on our coverage of all these top stories. we go to washington on window fed may raise rates. stocks falling after
yesterday's big rally and we go to london with oil falling on the report that oversupply will persist into next year. washington first. could lie out brainerd have been any dovish? not, she was comprehensively dovish. the much everything she pointed to was in the direction of let's wait and see and counseling patients and no need to rush. i think that's a major takeaway did she did not leave any question that she is not in favor of a september rate hike. month and so we question whether she is in favor a december rate hike. we got a pretty comprehensive dovish picture from her. alix: is she really on board for december which brings up the dissent and discord we will see in the fed. maybe it will be official in
september. of thatas asked yesterday and she wanted the question. -- and she punted the question. often does this. she regularly speaks before in a policy meeting followed by a press conference. did in march and september and now and has done it a couple of times in the past. it's interesting she seems to use these speeches in advance of policy meetings to air her dovish views. alix: another central-bank meeting at the boj which might change its maturity profile for his -- for its asset purchase program. give us the details. >> we reported the story earlier today saying the bank of japan is reassessing what it is buying as part of this program. is this isfor that part and parcel of what we heard on the fifth is that they are
trying to figure out whether their program is problematic for banks. about, one way to think can we make it less painful for the banks. alix: thank you very much from washington. already seven years later and they think that negative rates might not be so good. david: they are studying it. we will turn to the equity markets. central bankers are talking and oliver renick joins us now. tell us about the up yesterday. was this all about brainard? >> it probably was in some sense given that friday was sort of an interest rate related selloff. been tied to a weaker than expected language from the ecb. the move on friday seemed to be rate related and some was a reaction to the brainard
remarks. when you look at such a vast selloff friday, people were following the technical barriers big downbroken on days. 2.5 percent in the s&p 500 which means there are a lot of companies that get hit hard and they moved out fast. that gives you a reason to buy. at futuresre looking down over 100 right now. is this overselling and underselling and overreaction? >> when we talked to traders, it seems there is a lot of emotion out there. it has been such a quiet market for a long time. jolt, they that big start thinking whether they are oversold or overbought. there are some sectors that up the overvalued. in times of investor positioning, there are two different stories in terms of what's happening with hedge funds and asset managers and mutual fund managers.
hedge funds are pretty long but if you look at the asset managers, they have high cash piles. there is a lot of forces tagging in both directions. david: thanks so much for being with us. oil is also moving. jonathan: it is down by 24 percentage points. a report out today from the international energy agency so let's get the details from will kennedy. we will talk about supply resilience. demand andabout the waning demand, is that the real story? >> it was a switch from the iea as they change their position. they expected the markets to come back into position and they threw that out the window they talk about wobbling demand in china and india in which have been the main drivers of oil demand in recent months and years.
hashe u.s., gasoline demand been reported strong but there have been issues about reporting how the exports which are new to the market have been reported. they have cut demand sharply, 200,000 barrels next year. jonathan: let's talk about the supply. verbal intervention from opec which has been incredibly effective over the last month. where do we stand on the prospect for some kind of output deal between the major producers? >> what we hear is that they are starting to edge away from the idea of a capital production freeze. members andk opec russia to be -- to ask what the production will be. they want experts back to be sanctioned levels.
they want nigeria to bring back production but the problem is that will be a number that's bigger than what they are producing now. it's hard to see how such a deal takes oil out of the market. it can only improve sentiment and traders are starting to wonder whether that's priced in already. jonathan: thank you very much. a little bit of stabilization in europe so let's get more. moving fromvetech apple and t-mobile. said the iphone seven has been the biggest seller in history, four times as many orders as the iphone 6. apple is moving higher on the move and t-mobile is shooting higher on the news as well. been questions about the apple growth potential so this is a good move for apple in terms of t-mobile seeing
blockbuster preorder sales. another company we're paying attention to is a semiconductor sil possiblyed inter getting a deal for three point billion dollars. this is a smart car play production potential m&a. update on what's making headlines outside the business world. this is first word news. emma: hillary clinton said she did not immediately that disclose her diagnosis because she did not think it was a big deal. video appear to show her sunday.g she said she was overheated but when she sat down and had water, she felt better. she promised to release more
medical information in the next few days. president obama plans to veto legislation that would let families of 9/11 victims sued saudi arabia. ofasked of both houses congress and a voice vote in it suggests that congress could override the veto for the first time. obama says the measure could end up exposing american soldiers to legal jeopardy in foreign courts. the cease-fire in syria's civil war up is to be holding. the opposition activists are monitoring my -- minor violations. the agreement was put in the u.s. and russia and its up this to be for seven days. is really warplanes struck syrian artillery sites. israel says antiaircraft missiles were fired at the planes but missed. day,l news, 24 hours a powered by wood and 2600 analysts in more than 120 countries. coming up, why the fed
or not to hide. >> jamie dimon thinks the time has come. the fed has to maintain credibility and i think it's time to raise rates. the economy has been going on like this for seven years. to me, the return to normal is a and the rate gets more psychological attention than the actual economic effect it will have. jonathan: that's the jamie dimon view. in the presence of ofertainty and the absence accelerating inflationary pressures, it would be unwise for policy to foreclose on the possibility of making further gains in the labor market. with us now is kevin walsh. at stamford.rer -- stanford.
you said you would rather listen to the ceo and not the fed governor. >> it applies here. give jamie dimon credit for speaking out. he probably has 250 regulators showing up at his headquarters every day so it's impressive. news is, i'm here of the first day of the fed block out. we don't have to hear the musings of 19 people around the table. if i had my way, the blackout would last the sixth expect meetings so they can focus on what's happening in the real economy. how'd much of this has evolved from the fed? >> the general preoccupation of the central bankers is that more they talk, the more transparent they are and the more and light financial markets would be. that is not my view. to get is it's important
policy right and 19 people screaming over september is a great way to make it policy error. it would be far better if they spent six weeks focusing on hard underlying questions on the economy like productivity, labor force participation and i think it would be better for your viewers if they use the next week when the fed is not speaking to ask themselves about third-quarter earnings and why again.e mediocre they need to ask about the strength of the economy and why global traders down. this fed speak is great dangerous and not helpful. david: apart from that, how much does it matter? how important is janet yellen positive vote? >> you are asking me to pull back the curtain. under chairman bernanke he and i don't think it was tremendously different either under greenspan or janet yellen, the chairman has a lot of votes in their pocket. there has not been a dissent by a sitting governor for 15 years. if chair yellen ones to get
something done, my experiences she can get it done. that means she has to decide what she wants to do. that might be the bigger question. peoplee 18 other positioning to get her to come their way. we have seen a lot of that over this past week. that raises a chart another question and that's the actual neutral rate. the red line is the new rate as the fed sees it at 3%. the purple line is how williams sees it and the blue line is the effect of funds rate. even if the fed hikes 25 basis points, they don't have that much more room to hike as we get back to neutral. what >> does this chart look like next thursday? >>i think the fed funds line is important and everything else is central bankers be nonsense. alix: are you allowed to say that? >> with all due respect my fed
fans, they say they have a new neutral rate. fancy talk for productivity is low in the economy. at this rate, if they were to raise rates to get to their new lower level of the fed funds rate and let's assume they go in december, they will get to that target in 2027. the pace to get their strikes me as somewhat puzzling even if you believe this. is a function of them scared to move rates to what jamie dimon describes as normal. they are setting themselves a lower bar but it's not obvious win. warsh now does kevin vote given all the factors? wouldm a has been but i tell you about 2.5 years ago, i would have shrunk the fed balance sheet. there is an increasing global -- theus that shannon
janet yellen spoke to a fiercely in jackson hole and said we need to keep big balance sheet. that way we will have more to lose to help the economy. these balance sheets should have been stronger a lot -- should have been shrunk a long time ago. sale ofhave begun the treasuries and mortgage backed securities and slowly move up and interest rates so that in the unlikely event that the latest forecast is wrong, the fed would have some options. jonathan: you would actively word, yes.he fed >> i would have begun it years ago. the world is dying for u.s. treasuries and mortgage backed securities. this does not mean a fire sale but over the course of the next the fed could announce we have these assets and you might want them and here is the auction schedule.
it will show the fed is proceeding back to normalcy. it would show the fed is not trying to be fiscal policy members. we are returning to the powerful but narrow role but it's important what you heard from janet yellen in jackson hole. they don't want proceeds from rollouts leslie said slowly, they will replace them. i heard a permanently large balance sheet at the federal reserve and i have a procurement view that what the federal reserve does tends to be copied at most big central banks around the world. a feisty kevin joining us today, former fed governor sticking with us. argentinawill go to business and economic forum with an excessive interview with the president.
us and lael brainard specifically addressed the dollar. isi know where well and she a smart and effective treasury official. we used to have an agreement which of the federal reserve does not talk about the dollar and that is not talk about interest rates. that we would keep our dialogue right. we talked a lot about differences between chair yellen but i see ainard lot of similarities. janet yellen in her jackson hole speech and brainard cap's talking about the currency. they say the dollar is too strong and he needed to be weaker and that's coming from central bank officials. i think there is a concerted effort by policymakers in the u.s. to say that the dollar should be weakening. if they had a weaker dollar, we will get inflation back up so there is more agreement and disagreement over currency questions.
fit backw does this into the mandate of the fed? by their calculation, inflation is running at 160% over the last 12 months but we have no idea. the data is not that good. decision, they say inflation is below target. i don't know the difference and and 2.0g between 1.63 zero. i think their judgment is that the weaker dollar will be greater for the u.s. economy. whenever he central bank around the world is trying to devalue at the same time, we spend a lot of time and effort and end up back where we began. what's the difference between trying to keep it up and trying to keep it down? >> the old days were like six years ago. comfort zone,
the s&p 500 on the back of a dovish federal reserve. futures are soft today and equities are catching up today. the dax is up 4/10. was a softer dollar yesterday and a stronger dollar today. saidnor brainard was thetion the dollar equivalent of a 200 basis point hike. iea says thes, the continue.t will we traded at 45 dollars at wti. in the bond market, some gyrations on friday. yield come in at the long end on treasuries and we come in by 2.5 basis points on the 30 year yield. rate hike anxiety is
weighing a little bit in the last 24 hours. david: we will stay on the subject of central banks in witness is still kevin warsh. we spoke with marty feldstein earlier and he talked about how we measure the health of the economy. that we areinced just substantially underestimating how well we are doing. we areso means overestimating inflation. the idea that the fed should try -1.8 when we.6 probably cannot measure it is nutty. coast what does the west and stanford have to say? despite marty's pedigree, he's got this right. reduced we have
economic policy through a science that this is like physics is foolish and dangerous. marty has this right. the model the fed is using is useful but to take the output as gospel and believe in these forecasts that have only been wrong consistently for seven years is a bad way to make economic policy and dangerous for markets to follow. jonathan: what is the outcome of all of this? there is 20% of the dollar from appreciation -- there is a 20% there is a 20% appreciation of the dollar from june. what do you make of that? judgment ands a they want the dollar to be weaker. that's not a hawk versus doug, that's a u.s. policy. ; u.s. industrial policy but not a policy i would favor. of fed is in the business
establishing short-term interest rates. we should get out of to other businesses-establishing long-term interest rate and trying to manipulate or measure the currency. there is a free flow of capital and needs to move to the highest and best projects. in the depths of the financial crisis, maybe we have to exert more influence. jonathan: the other story is janet yellen. that the fedake has shifted away from looking at domestic factors and there is a concern about global risks? this can sound like a parochial american but the fed has huge second and third order impacts to every other economy in the world. it is a most impossible for other major central banks to make the right decision for policy good they have no idea what the federal reserve will do it if plans change with the seasons, once the fed
establishes a plan and strategy, if it sticks with it, then others can make the right policy moves for their country. an interconnected global economy and whether we like it or not, the u.s. central bank is the most in inside of that. alix: we saw james bullard throw his hands up at the dot plot. actually showed a chart in jackson hole. will that be more helpful? >> i think it would be useful if they demonstrated the kind of modesty that a chart demonstrates. it's a fancy way of saying we don't know and we will no longer pretend to be sowed size. that's the direction the bank of england has gone. mark carney suggests to markets to inform our judgments.
we are telling markets you should follow us. jonathan: the other side of the chart is we used to go into the inflation report and go through the inflation report and try to work out what is going on. you would be waiting for the bank of england to tell you. we are waiting for the fed to tell us but with a big asterisk. brought one ofot these forecasts for a long time. they need to use market prices to inform their decisions . theead, in the depths of crisis, they found they can push markets and whatever direction they want. i like the idea of extended where the fedds is doing more listening then talking. emerging markets are
susceptible to any kind of move in the treasury curve in the u.s. for more, let's bring in hans hume from our bureau in london. you have hsbc saying we are buying the dip. what is your call? good point that not only do central banks and emerging-market economies make there are large flows that come in and out of the investment community in the developed world. they can move the needle on these markets without any discrimination beat the credit. whether its equity or fixed income, you get into a situation --re these cell moves
stuff they can't buy gets left behind. is these movesay aside come you have to look at the stories underneath. you cannot cater off of the big markets to tell you what you should do credit by credit. the investments, if you do your homework, can have quite well regardless of what's going on on a treasury basis. when you see a lot of money that can buy emerging they move into bonds, it's been a huge run-up over the last year. world, if we see a fed that starts to communicate in a more hawkish way and we see a what is scenario, or the washout potential for emerging markets? >> the question is whether
markets will believe this. there has been a constant move that at the next meeting, the fed will be aggressive. if the fed wants to go in december, they will have to talk even more. , weill not have 19 speeches will have 40 and they will have to take the cacophony and make it more crystal-clear. they have a lot of work to do if they want to convince markets they are going to go and they might end up in december where they ended up now where they were poised to go until he got one payroll piece of information that was 25,000 jobs below consensus. the data is not that good. imagine of the payroll number before this was 175,000. we would have a dramatically different conversation and the underlying economy would be virtually unchanged. jonathan: the one data point that continues up is the implied maturityvia fed funds
futures. shows 22%, would you care? would that make a difference for a rate hike? current fed seems to be of the view that they ought not to surprise markets, that markets should be spoon fed and led to their decision. that's not my view. my view is the markets and the fed me to take in the range of information. the fed needs to go into their meeting and call it the way they see it. if you are to surprise markets from time to time but by chance, markets will behave much more disciplined and would pay more intention to the underlying data in that it dynamic the fed the market will improve. the probabilities have put the fed in the position where they are prisoners to market expectations. if i were back of the fed, i would not put myself in that position. looking at the cumulative
money flow into emerging-market bonds, we have seen a huge run-up over the past year. if we see a turn like they started to see in the last few days as the yield curve steep who are the winners and losers in the kind of scenario? >> that's a good question. a lot of the performance that has been embedded it is moments. the things at risk of the things that rally the most. bond index,at the 60% of it is investment grade. a bet onot necessarily improving fundamentals in the markets. you are writing the treasury train. since the beginning of august, the yields are back up a bit in the united states. the core emerging-market assets of gone by the wayside.
there's a rise in interest rates in the united states and the biggest winners will be the losers. the benchmark asset come off. there are other stranded stories --e the carpets in brazil like the corporate in brazil, they have not benefited from the rally with etf's. somes where you can get real bang for the buck. they will not be as punished. you might get a markdown but there is great value. the big guys can buy stuff in the stuff they can't. i wouldn't buy the stuff the big guys can buy but the stuff they cannot, that's where i would put my money. david: where do you go to get away from the dependency on interest rates? brazilian corporate's, investment grade? what else? a lot of the energy sector in
brazil, you got a lot of companies where you can buy the bonds at a fraction of their liquidation value of the company. there is a attractive opportunities in the sovereign situations. it is storied type of investments. venezuela, all their bonds are trading below recovery value with the assumption of a restructuring. argentina has some good stories. stories innteresting the middle east and stuff in eastern europe so you have to get down to beyond where the flow of funds has pushed the prices up. alix: what about fx? >> it's tricky, that's not our wheelhouse. traded say that fx, don't emerging-market fixed income as a long dollar-short dollar trade.
you have to make an assessment where the good returns are. emerging markets has changed consistently in the last five years and people have been doing more homework. my recommendation is don't to emerging markets as a wholesale asset class. don't go long insured fixed equities and fx is a wholesale trade. you need to do homework below the surface. alix: if we see the money flow out on a potential rate hike. thank you very much. jonathan: coming up, we go to and is areas for the business and economic forum -- we go to bring us areas for the business and economic forum. -- we go to bring us areas -- buenos aires for the business and economic forum. this is bloomberg.
"lix: this is "bloomberg . forill go to buenos aires the business and economic form coming up. emma: short seller carson blocks as investors in europe need to do their homework about companies piling on dad. he spoke to bloomberg tv in zurich. >> i think one of the major issues in europe is what made it interesting to us. it's that investors in europe of not doing the hard work
really trying to dig into the financial statements and understanding the economic realities that lie beneath. meanwhile, companies are borrowing at extremely cheap rates and these pressures build up until one day, they become a problem. he has described some year european -- some companies as ticking time bombs. agencyernational energy is reporting an oil glut and says the search the last longer than previously thought, probably into late next year. the month, they predicted market would return to equilibrium this year. the reason is falling demand in india and china. that's your bloomberg business flash. few moments, we will go live to argentina for an inclusive interview with argentine president. let's get one or two more questions into the formal federal reserve board chairman
kevin warsh. you can close to saying there was a confirmation bias, that the fed has a policy result they want to and the fed interprets the >> data as such? >>that gives them more credit than i intend to give them. a lurching and what abject of they have been trying to achieve over the last year. when they raised rates in december, they thought they would move you are times this year. over the last nine months, the economy has not been great but it's been moving in a positive direction and labor markets have been pretty good. another -- year without another rate hike. a strategy beats a plan. paul volcker and alan greenspan and ben bernanke has strategies they were trying to achieve. you change your strategy under circumstances but i have not seen any exigent circumstances. david: is this a failure of
leadership at the fed? >> it's a failure of thinking i knew about these challenges. this is been going on for seven years across the institution. economists, 80 or 90% of them were trained by marty feldstein and believe the same thing. suggest they need new oxygen and new ideas and a real reform in how they conduct policy. david: thank you so much for being with us. the former fed president, good to have you here. argentina has been in the news since the president won a tight election and he undertook major reforms. he lifted currency controls and bonds.d a dispute over he has invited economic leaders from around the world. erik schatzker is there where he is joined by the president of argentina for an interview.
erik: thank you so much. you toe to introduce bloomberg television viewers and radio listeners worldwide. we thank you for welcoming in us. >> thank you for coming back after 18 years. erik: i at machine to say it has been that long. >> you have invited multinational ceos around the world to persuade them that now is the time to invest in argentina. let's pretend that i am one of those ceos and that i have billions of dollars i could commit. >> how many? erik: let's say in the single digits. is your pitch? why should i invest in argentina today when this country has been so unkind to investors so long? let me convince you that we have started a new political
stage. it is a new argentina-based not in thernment but based maturity of the citizens of argentina. in addition to our talents, our we have toources, add constancy and rule of law and be predictable and clean up the economy and have clear rules. now,s why we believe that having learned that, working together inside argentina with all the conflicts we have internally but also the rest of the world, you cannot find another country with such an upside like argentina around the world. in spite of all this conflict i we can double our
population in five years. imagine that. it is a huge revolution of investment and protection. then we can add value to the production. we want to be the supermarket of the world. we are importing gas and oil thanks to terrible policies. we have one of the biggest shale gas reserves in the world. in renewables, argentina can be an important player. i'm talking about traditional , nontraditional energy, renewables, agribusiness. now we have mining.
we have the second-biggest lithium reserve in the world. it's the most forecast demand product for the next few years. it's going to be the future. sectors, i canr show you the opportunities we addition, we want to offer other value services to be produced here and exporter to the world. we compete with every country in the world. big businesses are coming to establish and increase the amount of people required their services. we are speaking live with the president of argentina. i admire your optimism.
and is not surprise me along with everyone else recognize the immense potential the country has. the people who are going to meet capital to argentina need to see results. -- have accomplished months you have accomplished much in your 10 months in office. you have removed some trade barriers and liberalize the foreign exchange regime in many things which are the steps. as you point out, is not quite enough. you are seeking to do more so i you canknow what more do realistically. what can you accomplish? >> we are working hard to ntinue reducing taxes. we have launched the most important infrastructure program in our history. there is another opportunity there for the most important company to the world. we need pipelines and energy and we are starting to build them.
to increase our production, we have to connect a huge country like argentina. we're working close with all the leaders in the country and unions and companies to work on productivity programs. costs and reduce our how can argentina come back to be competitive? we are all working on that idea of improving our ways of production, improving our education system. what is your top priority, that you hope to achieve in the next six months? >> i have three main objectives. i'm talking about policy, what can you do? you cannot eliminate poverty in six months. >> that will take decades.
we should have no poverty in a decade. erik: let's go back to the six months. >> we are working hard to building a strategic alliance with countries around the world. we have one with china and we are working on one with japan and korea. we're working with the european union. we have exchanged of the first proposals to have a free-trade agreement. the construction program is another priority. sok: dilma rousseff is out
is the new president someone you can work with? >> i am committed to work with whoever runs brazil. he will be here in a couple of weeks and we want to work together and open our economy to the world and create conditions. erik: many brazilians don't trust him. you'd? >> i will trust him. we need to work together. in addition to the isolation , thethe rest of the world past government of brazil affected our relationship. erik: how do you find your relationship with a chain -- with china? >> its strategic.
erik: what does that mean? invest inn infrastructure programs and the to buy goods from argentina so -- so we in argentina can create jobs in argentina. we want to increase production and argentina can do it. to be one ofved the best infrastructure builders in the last 20 years. erik: there are infrastructure companies in europe. >> we are open to all of them. i advised them to come. don't let the chinese and manage
the whole market. we want a balanced relation with the world. tok: if you want the chinese come, you have to offer them something you're are not going to offer to the europeans. >> there is room for everybody and we have to build a whole new country. houses,alking about there is room for everybody. erik: what about the united states? there will be a new president in washington. i expect to continue building a relationship like i did with barack obama. erik: regardless of whether it's hillary clinton or donald trump? >> i will try to have the best relation for argentina forever is elected. it would be easier with hillary clinton because i know her. i was mayor of this city with the clinton foundation so what i
believe is what we have started in terms of a mature relationship. this has to continue. erik: what about venezuela? argentina was a thorn in the side of america and other countries that want to see a regime change in venezuela. >> i worry about venezuela. i cannot see the way out of this situation. people are suffering their. re. see which way this will be solved. i thought there was a chance to have a referendum to have elections before the end of the did not accept that and resisted. continue inoing to the process of the generation. it is killing venezuelans every day. erik: will it take a revolution?
the actualknow but government is not respecting human rights. erik: but what can you do? argentina's chavez and maduro. -- argentina supported chavez and maduro. i'm going to every international forum to say we cannot accept or look to the other side. we have to denounce what is going on there. they are violating human rights every day. in the past, argentina suffered the same thing with the military government. iwe them so that's why --
owe them so that's why i feel this way. with we are speaking live the president of argentina a live in buenos aries. since we're talking about foreign policy, what is the malvina? had of foreign affairs is here. >> we are planning to have a meeting with him in new york. it's a you and meeting and we want to establish conversation. we know it will take time that we have a good start. cannot accept that we can't sit down at the table and discuss all the matters. so y scarlet:
are not prepared to sit down with the status quo? >> it's a question of respect. we want to sit down and start talking about these things. erik: are you willing to compromise on the argentina claim to the falkland islands? in order to amend those fences with the united kingdom? >> yes. erik: how? what are you prepared to put on the table? >> we are prepared to have dialogue. dialogue is a way to govern in the 21st century. mr. president, one yourcal test of
credibility, let's say and your ability to execute is the budget. deficit last year was 5.4 percent of gdp which was enormous. you promised to lower it, to what? >> 4.8% this year. erik: what about next year? >> around 4% next year. we have to go gradually. assume to go another way. we have to accept that this has of thedisaster and terms last 10 years. everyone has to understand we need to do this step-by-step. we willommitted and fulfill that commitment of reducing every year. we're cutting down inflation and have reduced it to half of what
it used to be. we will continue working on totally reach less inflation within two years. we will cut the deficit. erik: what will inflation be by the end of next year? >> 15%? that's an ambitious target. bringing down inflation, controlling fiscal spending, putting argentina on the right trajectory is an inferior creditors, the larger bonds but you have to balance that with the demand of a government. the right know what number is? you are going into election year argentina has midterm elections in october of next year. you want a majority in congress, the people want you to spend, >> don't they? i am so proud of my people. been takingi have
theyo popular decisions, are still backing our government. more than 60% of the citizens of argentina have a great hope for the future and i shared that. we understand we have to put our best effort to go in the right direction. i believe next year we will have a wonderful election and confirm that we're going in the right direction and it's not a government decision. it is a massive argentine decision, this change of this scenario. erik: let us talk for a moment about corruption. you must agree is critical for your government to be above reproach and suspicion. yet there are two cases in your own cabinet where we see
questions being raised about , at the house of your vice president, shares held by your energy minister. don't they undermine the standards you are trying to set for the country? cases, i am very .onfident i believe in my vice president. she will continue explaining to justice. in the past a government, they did not even want to give explanations. the minister of energy has already sold the stocks. erik: that addresses that problem. >> it's mindless compared to global operations. that the forms are
important. i believe argentina needs to heal the damage that crept and has caused. we're working on that. i promised my people i would put in place the best team in the last 50 years in terms of capability and honesty and i did it. i trust in my team and i believe has a huge change and we're going to cut corruption. if we need to reduce power to, we have to cut corruption. dismantle theou corruption in the tax collection service, the customs authority, the police, the judiciary? we're talking about the cultural change. can you do in one term of presidency? >> we are doing it every day.
things will not change in one year or one presidency but every day you are doing changes in the right direction. the example that should give it is the most important. a president is like a father so you have to always understand that the kids care what you do and not what you say. i am to interact in consequence and show there is another way of doing it. erik: you cannot afford to make a mistake. i expect it got me in the right direction and i love this country and i believe in my people and i am sure we can do it much better than we did in the past. argentina is ready to take its everybody thought it was not going to happen because it was a big country. we have a lot of talent.
we have skilled help people here that knows how to do things right. i am trying to help them. the protagonists of the future of them, not my government. everybody too help fill the role as best as possible. gracias.chos argentinaent of speaking live with bloomberg television. david: thanks very much. that was from the argentine business and investment forum. let's get caught up on the markets. we are to two minutes away from the jonathan: futures are deeply negative in the united states. dow futures are down by over 150. o.
waited 40 days for a one cent move and we got when friday and we got one monday and we are set to get another one today. the ftse is possible and the dax is up by 1/3. anxiety and the governor of the federal reserve, comes out and gives the hawks a slap in white set expectations for rate move. there is said anxiety. the commodity asset has the iaea suggesting that the oil glut will continue. 1.7%.oil is coming in by
the realmarket is story, the long and coming in with a rally by 2.5 basis points. calm yesterday in the u.s. and here are some individual movers. gm is relatively flat in the market but announced a new battery. tesla to theo meet market with a lower-priced electric vehicle. $37,500 that will also give you a federal tax credit. anadarko petroleum got hit because oil is off by over 2% but it's selling 35 million shares into the market to use to buy deepwater golf assets should by 15 billion dollars of free cash flow -- gulfater golf assets -
assets which should by $15 billion of free cash flow. watcher's ceo resigned after his comeback efforts failed. three current executives running the company. on what's happening in other markets, abigail doolittle is at the nasdaq. mark barton joins us from london. shares of apple are trading higher in the market after john leger tweeted that preorders for the iphone seven are the biggest in history. could come as a relief to investors after apple last week said they would not give color on the preorders. investors might've thought that was a smokescreen but it is consistent with the comments of gene munster from piper jaffray saying the iphone seven
preorders are on track. trading lower is netflix. analyst cites key challenges including increasing content clauses anything subscriber numbers could be under pressure. peace is more than 10% downside potential. thank you so much. mark barton is joining us from london. around the lows of the session and oil is hammering the overall equity indexes. iea report, oil is the worst performer on the stoxx 600 and we are lower for fourth consecutive day, the rest run in almost one month with uncertainty on the path of the leading central banks continuing to weigh on investors minds. check out partners group's shares up 11%.
the swiss buyout firm reports a 64% rise in first-half earnings beating estimates. the patent is massive of the company will be able to significantly higher dividends going forward. u.k. cpi is unchanged from the previous month, .6%. the white line isn't it. arising in annual 7.6% cost increased 9.3% and both rates are the fastest since 2011. timeonly a matter of
before they meet the winter headline inflation. jonathan: sterling is getting hammered. if that carries on, that story you upon -- pointed to have the volume turned up. up, fed speak and we will look at what to watch between now and their next meeting in the apple iphone seven goes on sale friday at the company says openingnot release weekend sales numbers. morgan stanley says look beyond the launch. we will have details and ahead. the market open is 14 minutes away. opening weekend sales numbers. this is bloomberg. ♪
david: next messages out of the fed yesterday into speeches before their blackout time. i believe the economy is sustaining sufficient momentum to substantially up her you -- achieve the monetary policy objective in an acceptable medium-term time horizon. asymmetry in the conventional policy toolkit would lead me to expect policy to be tilted somewhat in favor of guarding against downside risks relative to preemptively raising rates to guard against upside risks. is the fomc going to take her advice on this? we will now talk to carl riccado nna. >> i don't think it's as discordant as you think. these are fed speakers tuning up for what i believe will be a september move. may be dragged
along at that meeting that if the economy is decently in the back cap, i think she could go along with it. we had kevinwarsh on earlier and he said that it has been 15 years since there was a registered dissent. >> from a governor so it would be unusual if brainard did dissent but i think market participants are getting ahead of themselves thinking this is a fed that's not an agreement and everyone is pulling in a different direction. it's like when you listen to the symphony orchestra before they and itsing and a tuneup discordant but then they engage in the same task. i think there was expectation that maybe they were trying to put september in play and that's not how the janet yellen fed works. it's very deliberate and cautious. with market expectations, they
were not going to take a last-ditch attempt to put it in play. isn't there are only one vote that counts, janet yellen? a largebout matters but policymakers on the committee go to her line of reasoning in terms of how the economy will perform. david: thank you so much. coming up, shares of apple and details on what's driving the stock next. this is bloomberg. ♪
the next your super cycle is driven by a number of things. a 60% since the iphone 6 launch and you will get a new foreign factor which tends to drive accelerated upgrades. we expected significant increase which is whate half of smartphone users will say the drive upgrades. everything that seems to be coming next or, other competitors already have. it's difficult for apple to compete on hardware. maybe the ecosystem longer-term contrived that growth. with large screen phones, apple came out behind the samsung but that was a well reviewed product. company has higher loyalty rates and you see that with engagement numbers. tim cook talked about app downloads accelerating to 106%
growth the last month. we think that engagement and loyalty combined with hardware refreshes will drive significant acceleration growth. fiscal 18 units on the street, it's only 6% above the iphone 6 cycle despite the fact that the basis up 60%. lowhink estimates are too on we're going into a super cycle next year. has the wind apple at its back given his flow today and given the note seven recall as long -- as well as carrier promotions bringing back subsidies. alix: do you feel we will see new users or as these -- or are these just upgrades? apple can deliver training on upgrades but the note seven recall, the improved
camera technology could also bring new users. we talked about india as a market and apple is just beginning their and we are seeing aspirational consumers in that market much like china six years ago. alix: great to get your perspective, thank you so much. the opening bell was moments away and dow futures are up 138. nasdaq futures are off by 27. there is a little bit of stabilization in europe can it is a selloff in the u.s. bit the opening bell is next. this is bloomberg. ♪
off of the back of a dovish federal reserve speech. we are set to erase some of that. we are playing catch-up. closed in the speech was given. in new york city, switch out the boards quickly. this is the situation in the fx market area in a 102 handle come up .501%. the pound is getting hammered and the cable rate tops to 132, down by percentage points. stability in the bond market with treasuries unchanged at market,ea in the oil crude is down two percentage points in that report and 45 point $36 is how we trade. let's strip some of this back. alix: we are seeing some gives back from the rally yesterday, by .6 of 1%,00 off 20 120, the moving day average for the s&p 500 balance, a book
that average yesterday. also pointing out the fact that having a major selloff at record highs does not happen very often. you need a lot of selling in order to get more selling, so we're not quite there yet. in terms of what will move markets, jon was talking about oil down by almost 2% and the iaea say we will seek surplus persist into late 2017 and the key is it is all about demand. you have third quarter demand going to the lowest in two years because of weakness in india and china and in addition, you still have more oil coming online, so that pressuring equities and to see how long and how much it can drag down the stock market is having an impact into the energy stocks and if you take a look at the today charts of the s&p 500 energy charts, you can see in this opening right here, so you see this gap down. you look at chevron, exxon, the
leaders in the index. i was just talking about apple would katie huberty over at morgan stanley and you have t-mobile saying that john legend saying the iphone 7 preorder sales with the biggest ever, 375% figure in the iphone 6 six sales. they offer free trade ends for the iphone 6s and apple moving higher on that news and t-mobile was up in free markets and now slightly lower. still, we are seeing some givebacks from that rally we saw yesterday, but we will have a lot of chopping this into that fed and boj meeting next week. jonathan: about 2.5 minutes into the session and the dow jones move.p 500 seen a similar over the last month or so, a story of global volatility and it is a chart we talk about again and again, the correlation between the 10 year yield on treasury to the s&p 500. it is negative i.e. in the bond
market moving in lockstep with muchquity market, so how leverage is being put on and how many loans have been put on across investment strategy and what does it mean for those around the corner? joining us now is global head of equity at merrill lynch, ben. let's start, how much leverage has been built up? to estimateifficult exactly, but the periods of low volatility tend to draw leverage and positioning back into the market, which ultimately sows the seeds of the next shock. what is really unusual about today's world's we are seeing records been set in terms of going from states of stupor low volatility. as of last thursday, we had a record set in terms of the number of trading days in which we were trading and alter tight range and s&p 500, but then going from record low volatility to sudden shock, and that is
and we callroblem this a fragile market and fragility is the bigger risk that fund managers face today. low volatility is effectively alluding to a safer market than it really is. jonathan: there are some advantages and in the brexit scenario, what position did you belong in everything because of the bonds? in the scenario that we saw on friday, what do you make of that and how agile are things with that in mind? ben: shocks have different characteristics, and i think the post brexit period was relatively benign because you had a rally in bond at the same time equity was selling off. the bigger concern here is that to sell everything correlated move on the downside. number one because arguably, the bond selloff would have a domino effect to a broader array of
markets. in equity selloff, it is not necessarily push other asset classes down. number two, if you think about what has held the market over together in the last several years, it has been a promise of central bank support, monetary policy, do whatever it takes. of the nextcause sellout is a? around whether or not that monetary policy or protective pushes there, that is a lot more concerning then a whole host of other factors out there in the market. alix: this reminds me of conversations we had in august and february, january, and july of this year. there was a great chart in the notes that looked at equity through the hedge fund guys, who really invest in the asset price trend. you can see they're what happened last august. you can see what happened in december and january and what happened in july as the sell everything model picks up. what does the line look like and how much more selling can you quantify what we see in the u.s.
and abroad? that selling pressure is a function of the volatility we see in the markets. the more volatility we have, the more selling pressure there will be. which has gotten a lot of attention lately, partly it has gotten attention because of the success of those markets and the strategies and growth and assets in the strategies, but also because of their sensitivity to volatility. many of these types of strategies target fixed level of volatility, so the worst-case scenario is when you are at low levels of volatility, like recently, and you jump to a higher level, it automatically forces a significant or can force significant deleveraging. that really is the issue at hand. how much does volatility how much selling does that create and what is the reaction of the rest of the market and is that create a feedback loop that causes the funds to sell further? david: if you are in investor or
portfolio manager, had you protectors up against the jump in volatility? ben it is challenging. what we like: to say is that if you are trying to hedge a risk off event, there are three things to focus on. what is the catalyst? how vulnerable are markets today and what is the hedge? the catalyst is quite difficult to forecast. in many times, the catalyst is something people do not think about to begin with, something out of the blue. what was the catalyst last week? direction which central banks would go, but not a tremendous events. what is easy at the forecast is the vulnerability of the market and we argued that the markets ahead of last friday's selloffs were vulnerable because it was too low and leverage and positioning were building and that is sowing the seeds of the next shock. in terms of hedges, there is a variety of ways to protect against these types of events. often times, i think people do
not spend enough time in finding the smart way of doing it. one of the things we have liked recently is buying shorter dated by 500 but, dated -- selling longer dated for its because when you see these shocks, you see a strong inversion of volatility term structure and volatility in the near term and only in that shock do you see a bigger list in that whole curve, including the back end. the: and when you quantify in the report, you said $52 billion of selling could happen and have to be from the u.s., so significant amount of money that could come out of the market. we also argued, that if you look at the total liquidity that traded to the total volume that traded to the s&p 500 many futures market on friday, it was about over 500 billion, so in the context of liquidity in the market, it is big but not massive. i think that the key point here is that the client funds are more of an accomplice more than a corporate to the fragile
environments, and the fragile environment really is a bigger , which roots back to the overdependence of markets on central banks and we talked over dovish and hawkish rhetoric drives so much of the market dynamic that also the correlation. one thing that is the correlation today is -- and you brought it up in the beginning -- correlation today is record high, relative to record volatility, so our kids look safe on the surface but they are very correlated and dependent on which direction central banks go and jonathan: that is part of the recently have fragile markets. we caught up with someone -- thanks go and that is part of the recently fragile markets. jonathan: we have caught up and how much risk is it when the riskiest assets are meant to be the safest ones and they seem to be driving effortlessly? have you been looking at that in a big way? for theis a concern
same reasons i said earlier. i would argue that a bond led selloff with domino to other classes and i think the origins of a bond led selloff are exactly the potential of the potential risks that they face from the lack of central banks protection of confidence. markets have become so dependent on that protective foot from central banks over the last couple of years. the biggest risk in the market has to be a loss of that protective function, so any? run that protective foot are the biggest risks we see that the markets today. owler, thank you for being with us. coming up, an exclusive interview with the head of argentina-based tech end. the ceo joins us next up when is always. -- joins us next. this is bloomberg. ♪
david: this is "bloomberg ." i am david westin in the hewlett-packard and a prize winner. coming up, bob dudley from the argentina business and investment forum. alix: let's head back to point us either is for the -- buenos a ires, where erik schatzker is with the initial conglomerate. erik: thank you. a pleasure. you know this country well. help people understand. how much has the president accomplished thus far and how much does it mean to the country? paolo: i think he is really a major change of the country.
in the end, after 12 years of government that was driven by [indiscernible] trying to set the country on a different track and he achieves this. common in theeen past. argentina has a lot of ups and downs. a country of unlimited resources and i believe in it. findingdifficulties of management and political my goal iss, and setting the sheep on the right course. this is a big effort. i am very confident. multinationala conglomerate that could invest anywhere in the world. has this government done enough to inspire you or inspire your
company to invest more in argentina? paolo: no doubt. first, it came to us and we have 17 in the country and we have been in the ups and downs and we have survived and that is good. [laughter] we are committed. have 20,000 people working in this country and we need to invest. this moment is our focus were investment and argentina is very strong. so sea opportunities, preparing to invest in argentina substantially. erik: when you say substantially, can you put a number? paolo: the development of energy resources, i really believe that it is a game changer and it is private -- erik: it is the world's second-largest shale processor in northern argentina.
paolo: yes. there are a lot of bother and resources and we had the previous infrastructure. was in thewhat united states with any good resources, what we can do is -- erik: how much business could that generate for your group? paolo: we have a plan to develop our acreage and as soon as we define finally the framework of what we are doing, but imagine that every one may require $10 million and argentina could be isthe horizon of 1000 which $10 billion. erik: when you talk about acreage, do you plan to lease that will become a producer? paolo: we are producing that, we drove now, and we have it in a
different area but we operate and we had that company. we consider this as an area that is in the long run in argentina. in five years, 10 years, argentina make arrive to contribute to this. erik: have we seen the bottom and oil prices? is that behind us? paolo: uh, yes. [laughter] erik: if that is the case, or do you see wti or brent in two years or three years time? production is going down and consumption is steadily going up with ups and downs of economies, so sooner or later, the balance will drive an increasing drive.
it could be 2017, i think so, but i think that the label that we are now is not very far. erik: doesn't the recovery in shale drilling, and they are seen it already in the basin, doesn't that put the caps on prices? paolo: i don't think so because in the end, the additional drilling is adding to the production, but it will take a lot of additional drilling before the supply and demand that could get into equilibrium, so i think it is in the horizon of study raise up rates in 2017. erik: you have said your focus running this group is to come out of the downtrend stronger. how do you do that/ -- how do you do that? paolo: first, we had to organize internally just streamlined -- organize internally to streamline our operation. there is a new
facility we started in the second part of [indiscernible] and the other example is the point that the information technology is associated and what we are doing. there andight reducing the supply change erik: to a minimum and getting technology into it. what about consolidation? a lot of your competitors are in a weaker situation than you are. paolo: it could be to some extent and even if the level of becentration to [indiscernible] so that this limits to what we can do. erik: enrich industry to see opportunity? paolo: which region mainly. that, i thinkout there are challenges in the world but there are also some in which consolidation will be most
of it. erik: so it is most likely the vehicle to consolidate? paolo: the other company that it controls is a more original company. in mexico, there is a steelmaker, in argentina, see the, but when i expansion of argentina, it will be driven by this company but also the energy sector. erik: you operate in regions around the globe. the backlashabout against free trade and what seems to be the emerging trend of anti-globalization? paolo: no. i think we should have an open world, provided we can serve a level playing field, and we can build an open space along countries that share the same view and values.
in the center, we had some concern about china because sometimes china is not a market economy and the way they manage their trade in the economy could rules of trade. erik: on that note, thank you so much. i send it back to you. jonathan: let's get you up to speed on the markets. about 21 minutes into the session. we opened lower and down by nine of 1% on the dow jones. some resiliency and european equities. i missed out on the big day of .ains yesterday up about .1 of 1% on the dax. switch up the boards and the fx market the dominant story with the weaker pound across the g 10 space in the cable rates drops down, down by almost 14 percentage point.
inflation and the united kingdom for stays steady but the headline number, input costs surging. commodities are softer with brent and the bti coming in. this is the wti contract trending. to wrap up the markets, about 22 minutes. let's get to movers down at the nasdaq. the nasdaq, pulling back from yesterday's rebound rally from friday's selloff. we will see whether or not there is a continuation. dragging sharply, netflix down sharply on a downgrade from mccourty to underperform. their siding challenges that include rising content clauses and competition from the likes of amazon. he thinks the importance of subscriber growth numbers could impact disappointment in the long-term and he sees more than 10% downside for the shares of netflix, a stock i would be down more than 15% this year. also dragging on the nasdaq,
intuit shares are lower on a downgrade at morgan stanley. while the fiscal year 7 -- 2017 operating margin guidance is achievable, for fiscal year 2018 looks more difficult. lessxpansion is much likely. a stock right now that is higher on the year. jonathan: thank you. we are lower by almost one full percentage point in the s&p 500. next, we wrap up the markets and look ahead at what is in the market diary for the state ahead. this is bloomberg. ♪
obviously, yesterday, we saw a demand for a 10 year and three year treasury and it did not live up, a little weak. david: buckle your seat belts today. down on friday, up on monday, oil going down, the pound down. jonathan: do you know how refreshing it is to look at the data had [indiscernible] session andnto the stocks are lower. another 40 days of moving 1% to the upside and back to the downside. potentially, three days in a row for the quiet is over and from new york city, jonathan ferro, alix steel and david weston. this is bloomberg. ♪
vonnie: we are going to take you from buenos aries to frankfurt in the next hour. first, let's get to the markets desk after volatile trading days. 30 minutes into the trading session in the u.s. julie hyman has the latest. 1%, sos&p 500 down about if we have another move in the index, it will be the first in a street, it will be three straight sessions for the first time going back to june, so this selloff in the wake of the upsurge yesterday, so it has been a seesaw few days. oil seems to be one of the driving factors today. than oil prices down more 2% after the international energy agency said that the global oversupply we are seeing will persist until late 2017. that is an extension